XLF vs. VBK: What’s The Difference?

The Financial Select Sector SPDR Fund (XLF) and the Vanguard Small-Cap Growth Index Fund ETF Shares (VBK) are both among the Top 100 ETFs. XLF is a SPDR State Street Global Advisors Financial fund and VBK is a Vanguard Small Growth fund. So, what’s the difference between XLF and VBK? And which fund is better?

The expense ratio of XLF is 0.05 percentage points higher than VBK’s (0.12% vs. 0.07%). XLF also has a higher exposure to the financial services sector and a higher standard deviation. Overall, XLF has provided lower returns than VBK over the past ten years.

In this article, we’ll compare XLF vs. VBK. We’ll look at industry exposure and holdings, as well as at their risk metrics and portfolio growth. Moreover, I’ll also discuss XLF’s and VBK’s performance, annual returns, and fund composition and examine how these affect their overall returns.

Summary

XLF VBK
Name Financial Select Sector SPDR Fund Vanguard Small-Cap Growth Index Fund ETF Shares
Category Financial Small Growth
Issuer SPDR State Street Global Advisors Vanguard
AUM 40.81B 37.89B
Avg. Return 12.17% 16.53%
Div. Yield 1.57% 0.45%
Expense Ratio 0.12% 0.07%

The Financial Select Sector SPDR Fund (XLF) is a Financial fund that is issued by SPDR State Street Global Advisors. It currently has 40.81B total assets under management and has yielded an average annual return of 12.17% over the past 10 years. The fund has a dividend yield of 1.57% with an expense ratio of 0.12%.

The Vanguard Small-Cap Growth Index Fund ETF Shares (VBK) is a Small Growth fund that is issued by Vanguard. It currently has 37.89B total assets under management and has yielded an average annual return of 16.53% over the past 10 years. The fund has a dividend yield of 0.45% with an expense ratio of 0.07%.

XLF’s dividend yield is 1.12% higher than that of VBK (1.57% vs. 0.45%). Also, XLF yielded on average 4.36% less per year over the past decade (12.17% vs. 16.53%). The expense ratio of XLF is 0.05 percentage points higher than VBK’s (0.12% vs. 0.07%).

Fund Composition

Industry Exposure

XLF vs. VBK - Industry Exposure

XLF VBK
Technology 0.0% 27.87%
Industrials 0.0% 13.19%
Energy 0.0% 1.77%
Communication Services 0.0% 3.24%
Utilities 0.0% 0.32%
Healthcare 0.0% 23.24%
Consumer Defensive 0.0% 3.83%
Real Estate 0.0% 7.87%
Financial Services 100.0% 4.05%
Consumer Cyclical 0.0% 12.13%
Basic Materials 0.0% 2.49%

The Financial Select Sector SPDR Fund (XLF) has the most exposure to the Financial Services sector at 100.0%. This is followed by Technology and Industrials at 0.0% and 0.0% respectively. Consumer Cyclical (0.0%), Real Estate (0.0%), and Consumer Defensive (0.0%) only make up 0.00% of the fund’s total assets.

XLF’s mid-section with moderate exposure is comprised of Healthcare, Utilities, Communication Services, Energy, and Industrials stocks at 0.0%, 0.0%, 0.0%, 0.0%, and 0.0%.

The Vanguard Small-Cap Growth Index Fund ETF Shares (VBK) has the most exposure to the Technology sector at 27.87%. This is followed by Healthcare and Industrials at 23.24% and 13.19% respectively. Energy (1.77%), Basic Materials (2.49%), and Communication Services (3.24%) only make up 7.50% of the fund’s total assets.

VBK’s mid-section with moderate exposure is comprised of Consumer Defensive, Financial Services, Real Estate, Consumer Cyclical, and Industrials stocks at 3.83%, 4.05%, 7.87%, 12.13%, and 13.19%.

XLF is 95.95% more exposed to the Financial Services sector than VBK (100.0% vs 4.05%). XLF’s exposure to Technology and Industrials stocks is 27.87% lower and 13.19% lower respectively (0.0% vs. 27.87% and 0.0% vs. 13.19%). In total, Consumer Cyclical, Real Estate, and Consumer Defensive also make up 23.83% less of the fund’s holdings compared to VBK (0.00% vs. 23.83%).

Holdings

XLF - Holdings

XLF Holdings Weight
Berkshire Hathaway Inc Class B 12.83%
JPMorgan Chase & Co 11.47%
Bank of America Corp 7.57%
Wells Fargo & Co 4.56%
Citigroup Inc 3.56%
Morgan Stanley 3.32%
Goldman Sachs Group Inc 3.15%
BlackRock Inc 3.02%
Charles Schwab Corp 2.66%
American Express Co 2.62%

XLF’s Top Holdings are Berkshire Hathaway Inc Class B, JPMorgan Chase & Co, Bank of America Corp, Wells Fargo & Co, and Citigroup Inc at 12.83%, 11.47%, 7.57%, 4.56%, and 3.56%.

Morgan Stanley (3.32%), Goldman Sachs Group Inc (3.15%), and BlackRock Inc (3.02%) have a slightly smaller but still significant weight. Charles Schwab Corp and American Express Co are also represented in the XLF’s holdings at 2.66% and 2.62%.

VBK - Holdings

VBK Holdings Weight
Charles River Laboratories International Inc 0.78%
Pool Corp 0.73%
Bio-Techne Corp 0.73%
Avantor Inc 0.73%
PerkinElmer Inc 0.72%
Entegris Inc 0.7%
PTC Inc 0.62%
Fair Isaac Corp 0.57%
Bill.com Holdings Inc Ordinary Shares 0.56%
Avalara Inc 0.55%

VBK’s Top Holdings are Charles River Laboratories International Inc, Pool Corp, Bio-Techne Corp, Avantor Inc, and PerkinElmer Inc at 0.78%, 0.73%, 0.73%, 0.73%, and 0.72%.

Entegris Inc (0.7%), PTC Inc (0.62%), and Fair Isaac Corp (0.57%) have a slightly smaller but still significant weight. Bill.com Holdings Inc Ordinary Shares and Avalara Inc are also represented in the VBK’s holdings at 0.56% and 0.55%.

Risk Analysis

XLF VBK
Mean Return 1.21 1.22
R-squared 73.26 80.56
Std. Deviation 18.86 17.95
Alpha 2.63 -2.81
Beta 1.15 1.18
Sharpe Ratio 0.74 0.78
Treynor Ratio 11.25 11.18

The Financial Select Sector SPDR Fund (XLF) has a Alpha of 2.63 with a Beta of 1.15 and a Mean Return of 1.21. Its R-squared is 73.26 while XLF’s Standard Deviation is 18.86. Furthermore, the fund has a Treynor Ratio of 11.25 and a Sharpe Ratio of 0.74.

The Vanguard Small-Cap Growth Index Fund ETF Shares (VBK) has a Beta of 1.18 with a R-squared of 80.56 and a Treynor Ratio of 11.18. Its Alpha is -2.81 while VBK’s Sharpe Ratio is 0.78. Furthermore, the fund has a Mean Return of 1.22 and a Standard Deviation of 17.95.

XLF’s Mean Return is 0.01 points lower than that of VBK and its R-squared is 7.30 points lower. With a Standard Deviation of 18.86, XLF is slightly more volatile than VBK. The Alpha and Beta of XLF are 5.44 points higher and 0.03 points lower than VBK’s Alpha and Beta.

Performance

Annual Returns

XLF vs. VBK - Annual Returns

Year XLF VBK
2020 -1.68% 35.29%
2019 31.88% 32.75%
2018 -13.09% -5.68%
2017 22.03% 21.9%
2016 22.55% 10.74%
2015 -1.6% -2.51%
2014 15.02% 4.02%
2013 35.37% 38.18%
2012 28.53% 17.67%
2011 -17.16% -1.43%
2010 11.97% 30.87%

XLF had its best year in 2013 with an annual return of 35.37%. XLF’s worst year over the past decade yielded -17.16% and occurred in 2011. In most years the Financial Select Sector SPDR Fund provided moderate returns such as in 2010, 2014, and 2017 where annual returns amounted to 11.97%, 15.02%, and 22.03% respectively.

The year 2013 was the strongest year for VBK, returning 38.18% on an annual basis. The poorest year for VBK in the last ten years was 2018, with a yield of -5.68%. Most years the Vanguard Small-Cap Growth Index Fund ETF Shares has given investors modest returns, such as in 2016, 2012, and 2017, when gains were 10.74%, 17.67%, and 21.9% respectively.

Portfolio Growth

XLF vs. VBK - Portfolio Growth

Fund Initial Balance Final Balance CAGR
XLF $10,000 $30,782 12.17%
VBK $10,000 $48,639 16.53%

A $10,000 investment in XLF would have resulted in a final balance of $30,782. This is a profit of $20,782 over 11 years and amounts to a compound annual growth rate (CAGR) of 12.17%.

With a $10,000 investment in VBK, the end total would have been $48,639. This equates to a $38,639 profit over 11 years and a compound annual growth rate (CAGR) of 16.53%.

XLF’s CAGR is 4.36 percentage points lower than that of VBK and as a result, would have yielded $17,857 less on a $10,000 investment. Thus, XLF performed worse than VBK by 4.36% annually.


Current recommendations:

Over the past years, I have discovered several tools and products that have helped me tremendously on my path to financial freedom:

P.S.: The links below are affiliate links, which means I receive a small commission at no extra cost to you when you sign up for one of the services. Thank you for your support!

1) Take a look at M1 Finance, my favorite broker. I love how easy it is to invest and maintain my portfolio with them. I can set up automatic transfers, rebalance my portfolio with one click and even borrow up to 35% of my assets at super low interest rates!

2) Fundrise is by far the best way I've found to invest in Real Estate. You can diversify your portfolio by investing in their eREITs or even allocate capital to individual properties (without the hassle of managing tenants!).

3) If you are interested in crypto, check out Gemini. I've started allocating a small amount of assets to the growing crypto space and Gemini has just been a breeze to use. Once you register, make sure to also open an Active Trader account to buy crypto at the lowest fees on the market (just 0.03%!).

To see all of my most up-to-date recommendations, check out the Recommended Tools section.

Leave a Reply